https://en.wikipedia.org/wiki/Median has this definition.
It's also the definition that I was taught at school.
Oxford Languages defines it as: "denoting or relating to a value or quantity lying at the midpoint of a frequency distribution of observed values or quantities, such that there is an equal probability of falling above or below it", which also supports the idea of taking the midpoint between the two middle values.
Merriam Webster define it explicitly in the way OP does (arithmetic mean of the two middle values): https://www.merriam-webster.com/dictionary/median
I'm not sure why you think it's a 'completely useless definition'. It would perhaps be a logical argument that data sets of even length do not have a median, but I think this would be even more useless.
To the layperson (which Mary Jones undoubtedly is), providing the 'median' age as an age half of the employees are older than/younger than, is what would be expected. Your first bullet point makes sense here. For example here:
18, 20, 25, 30, [35, 40], 45, 50, 55, 60
Most people would expect the median to be calculated as 37.5. However, as you mention, any real number higher than 35 and lower than 40 would equally fulfill the definition of 'equal probability of falling above or below' assuming this is the full population. Would you then argue that there are infinitely many medians in this data set, or none?
There are other issues with calculating 37.5, such as the fact it implies a higher degree of precision than it ought to. But ultimately, as a practical and usable insight into data, especially data with extreme outliers or high levels of skew, I strongly disagree that this definition is completely useless.